Monday, November 29, 1999

Germany appeals to EU neighbours to back bank levy

German Chancellor Angela Merkel appealed to the rest of the European Union to back plans on Thursday for a levy on the banks she blames for the economic crisis, but divisions remained over how and when to impose it.Merkel made her pitch ahead of a meeting of EU leaders to discuss tightening controls on spending by the bloc's 27 countries as well as to agree on the broad principle of charging banks a crisis tax."We will prepare for the G20 and G8 meetings so that we can go with as united a European position as possible that also covers a bank levy and taxation of financial markets," Merkel said."Germany and France ... are in favour of calling more on those who caused the crisis to pay up."Diplomats prepared a statement backing the principle of a bank levy, which the EU's executive arm has said it could pioneer despite a failure to secure agreement from other global powers to follow suit."The European Council agrees that member states should introduce a levy on financial institutions to ensure that they contribute to the cost of crises," officials wrote in a draft statement from the leaders' meeting.But doubts persist as to whether Europe can agree a detailed code for any levy.Britain, which will introduce its own bank charge, opposes pan-European rules. Ireland is nervous that an extra charge on its banks could exacerbate their difficulties.Commenting on a levy, Austrian Chancellor Werner Faymann said: "I want to push it through on a European level but there are many countries that do not think this."UP IN THE AIREarlier this month, finance ministers from the Group of 20 countries ditched plans for a global bank levy in the face of opposition from Japan, Canada and Brazil, whose lenders came through the credit storm relatively unscathed.This threw down the gauntlet to the European Union to go it alone. That would be challenging because banks in Frankfurt, for example, would argue that they were being put at a disadvantage to rivals in Toronto, which will not charge a levy."It is fair to say that a fairly substantial majority would be in favour but there are many, many issues to be resolved," one diplomat said.His view was echoed elsewhere. "The questions of how to levy, how much and what to do with the money obtained are still very much up in the air," said another.Britain and France would use the money raised for public spending, while Germany wants it ring-fenced for future crises.A financial transaction tax, recently introduced to the debate by Germany, is even more controversial because many believe such curbs in Europe would drive trading to other continents. Britain is opposed to such a measure.Leaders from 20 of the world's most powerful economies, the G20, meet next week in Toronto.But it is unlikely the EU, represented by leaders from French President Nicolas Sarkozy to British Prime Minister David Cameron, each with their own vision of a levy, will overcome the objections of Japan to find a single global approach.Axel Weber, head of Germany's Bundesbank, said the chances for such a global deal were slim.Merkel too is in a weak position to unite, just weeks after she was criticised by neighbours for a surprise ban on some trading, a move which sent markets into a spin and raised tensions between Paris and Berlin.(Editing by John Stonestreet and Dale Hudson)News posted by www.newsinfoline.comClick here to read more news from www.newsinfoline.com Please follow our blogs